Investing.com -- S&P Global Ratings has revised Hewlett Packard Enterprise Co (NYSE: HPE ).’s outlook to stable from negative following the completion of its Juniper Networks (NYSE: JNPR ) acquisition, while affirming the company’s ’BBB’ credit rating.

The rating agency forecasts HPE’s pro forma adjusted leverage to decline to the low 1x area by the end of fiscal 2026. S&P had placed HPE on negative outlook in January 2024 when the acquisition was announced, anticipating leverage could exceed 2x by the transaction’s close.

With the deal now finalized, S&P estimates HPE’s pro forma adjusted leverage below 2x, with a trajectory toward the 1x area by fiscal year-end 2026. The agency expects revenue growth near the mid-teen percent area in fiscal 2025 and 2026, incorporating partial Juniper contributions in 2025 and full-year contributions in 2026.

S&P also projects adjusted EBITDA margin expansion to approximately 15% by fiscal 2026, driven by higher-margin Juniper contributions and targeted cost savings of up to $450 million. This should generate free operating cash flow between $2.5 billion and $3.0 billion in fiscal 2026.

The rating agency expects HPE to apply most excess cash flow toward acquisition-related term loan repayments, aside from dividends and modest share repurchases. A potential sale of HPE’s remaining stake in H3C business, valued at over $1 billion, could result in additional deleveraging.

S&P upgraded HPE’s business risk profile to satisfactory from fair, reflecting improved competitive positioning. The Juniper acquisition doubles HPE’s networking segment revenue to about $10 billion, which will account for more than half of its pro forma operating income.

For stand-alone HPE, S&P expects solid revenue growth near 8% for fiscal 2025, primarily driven by ongoing demand for AI-related products and HPE GreenLake services. The company reported 6% revenue growth in the second quarter of fiscal 2025, with cumulative AI systems orders reaching $8.3 billion and a $3.2 billion backlog at quarter-end.

The stable outlook reflects S&P’s view that HPE will generate modest revenue growth and margin improvement over the next two years while integrating Juniper Networks and navigating the evolving hardware environment.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.